With Indian oil and gas exploration companies such as Reliance Industries Ltd and ONGC getting more into offshore drilling, new opportunities have opened up for insurers.
The insurance companies are seeing increase in loss limits (higher compensation in case of any mishap) in the deals.
New trends such as protection against seepage and pollution damages and governance risks are also picking up, says Sanjay Kedia, Country Head and CEO, Marsh India Insurance Brokers Pvt Ltd.
A few domestic insurance firms such as ICICI Lombard and Oriental Insurance are coming up with very specific insurance products, he said. Marsh is the Indian subsidiary of NYSE-listed Marsh & McLennan Companies and deals in insurance broking and risk management services.
While launching Marsh’s services for the oil and gas industry in India here on Monday, he said that the company places around Rs 1,500 crore of insurance and re-insurance premiums in India from several sectors.
Globally, an oil exploration company has an average loss limit of around $4 billion for offshore operations. However, in India, the limit is in the range of $0.5-1.5 billion.
When the loss limit crosses $1 billion, it needs to be handled carefully. However, insurance companies are not getting into reserve insurance, Kedia added.
Generally, insurance companies do not prefer insuring reserves because they do not have the expertise to re-affirm reserve estimates provided by an explorer. At the same time, upstream sectors also do not see many “loss of productivity income policy.”
Loss of productivity means hydrocarbon output is below estimates leading to loss of revenue.
But downstream companies such as refiners and petrochemical companies opt for loss of productivity income policy.